How to Prepare Your Business for Sale

How to Prepare Your Business for Sale

Selling your business may be one of the most significant financial and personal decisions you’ll ever make. Whether you're planning to retire, pivot to a new venture, or simply cash in on years of hard work, a successful sale requires more than just finding a buyer. It demands careful legal and operational preparation to protect your interests and maximize value. Here are some of the issues that need to be addressed before selling your business:

1. Get Your Legal House in Order

Buyers will scrutinize your legal structure and records. Make sure:

• Your entity (LLC, corporation, etc.) is properly formed and in good standing.
• All annual filings, minutes, and compliance documents are up to date.
• Ownership interests are clearly documented.

If there are unresolved legal issues, now is the time to address them.

2. Review Key Contracts

Contracts are a major part of your business's value. Gather and review:

• Customer and vendor agreements
• Leases
• Employment and independent contractor agreements
• Licenses and permits
• Intellectual property registrations

Ensure contracts are assignable or transferrable. Buyers will see more value in the business if you have strong enforceable contracts in place.

3. Organize Your Financials

Though your CPA will help prepare the books, a buyer will want to see clean, consistent financial records that align with your legal structure and operations. Make sure:

• Your books are accurate and professionally maintained.
• You can explain any inconsistencies or unusual line items.
• Tax filings match financial statements.

4. Address Employment Matters

Buyers will examine how your workforce is structured. Confirm:

• Workers are properly classified (employee vs. contractor).
• Key employees have signed confidentiality and non-solicitation agreements.
• You’ve documented compensation, benefits, and accrued liabilities.

Consider implementing (or updating) an employee handbook to reduce exposure during diligence.

5. Protect Intellectual Property

Make sure your business owns the rights to its brand, website, content, software, and other IP. Buyers want to know they’re acquiring clear, transferable rights to your business’s intellectual property. That includes:

• Trademarks: Ensure your business name, logo, slogans, and product names are registered or at least in the process of registration. Confirm the registrations are in the company’s name and not yours personally.
• Copyrights: If you’ve created original content (website copy, software code, marketing materials, videos, etc.), make sure that your business owns the copyrights or have secured assignments from creators. Without a clear assignment, it is likely that someone else owns the copyrights.
• Patents: If your business owns any inventions, confirm patents are properly filed and assigned to the company.

If independent contractors or third parties helped create any IP, verify that they’ve signed agreements transferring ownership to your business. Without clear documentation, buyers will not have confidence in the assets that they are buying.

6. Understand the Structure of the Deal

Business sales are typically structured in two different ways: 1) asset sales, or 2) stock/member interest sales. Generally, asset sales offer the buyer with less liability because they are only acquiring the assets of the business. While stock sales may be simpler for companies with lots of contracts, licenses, and intellectual property. Each structure has different tax and legal implications that should be discussed with an experienced business attorney and tax advisor.

Conclusion

Preparing your business for sale can often increase its value to a buyer. As the seller you want to present your business as a smooth-running machine. As the seller, it’s not just about boosting curb appeal. A clean well-structured business reduces risks for both buyer and seller and ensures a smooth transition. By addressing legal, contractual, and operational issues in advance, you’ll save time, avoid surprises, and help ensure the deal closes on favorable terms.